THE IMPORTANCE OF SYSTEMIC RISK MANAGEMENT IN THE BANKING SECTOR

Abstract

Billio et al. (2010) note that the financial crisis of 2007–2009 has created renewed interest in systemic risk. The objective of this paper is to argue the importance of systemic risk management in the banking sector and to analyze the arguments of systemic risk management in the banking. The research results of this study show that the main arguments of systemic risk management in the banking can be distinguished into four main groups. The most important economic arguments of systemic risk management in the banking are following: the major role of banks in the financial system and economy, the high frequency of banking crises and their economic consequences, and the occurrence of banking crisis increase the probability of other financial crises. The social arguments of systemic risk management in the banking are also important because banking crises can have long-term consequences for human development and long-term deleterious effects on the psychological wellbeing of population. The scientific and other important arguments of systemic risk management in the banking are also discussed in this article. DOI: http://dx.doi.org/10.5755/j01.em.17.3.2097